Understanding the Unpredictable Petrol Price Cycles in Australia
Petrol prices in Australia have traditionally followed predictable cycles, but recent events have thrown these patterns into disarray. In the early days of the Middle East war, petrol stations across major cities like Brisbane, Sydney, and Melbourne raised their prices at a rate that exceeded the rise in global oil prices. Experts suggest this was an attempt by retailers to maintain their profit margins.
However, the situation has since changed dramatically. The profit margin on petrol has been squeezed to almost nothing, marking a complete reversal from previous trends. This shift has sparked discussions among experts about the factors contributing to this change, including warnings from the consumer watchdog, increased media scrutiny, and consumers actively checking prices at multiple stations.
A Shift in Profit Margins
In normal times, petrol retailers can sell fuel for about 15 cents per litre more than the wholesale (terminal gate) price (TGP). However, according to an ABC analysis of fuel prices, this margin has dropped to approximately four cents per litre over the last couple of weeks in March. Prices have also converged to essentially the same level across Australia’s capital cities, which is a stark contrast to the usual situation where prices vary by up to 50 cents per litre between different cities.
A Concerning Pattern Develops
At the beginning of March, motorists started to worry about a potential fuel crisis. The Strait of Hormuz, where about 20% of the world’s oil transits, experienced a standstill, although there was still plenty of petrol in reserve and en route to Australia. Ian Jeffreys, an economist at RACQ, noted a “concerning” pattern as retail prices began to rise faster than the wholesale price.
Usually, it takes a few days for changes in the wholesale price to affect the retail price. However, Dr. Jeffreys observed that petrol stations were raising their prices on the same day the wholesale price increased. This development occurred during the usual fuel price cycle, adding to the already high prices.
The Watchdog’s Warning
On March 4, RACQ wrote to the Australian Competition and Consumer Commission (ACCC), expressing concerns about the pricing behavior of retailers. Dr. Jeffreys highlighted that while the global oil price had increased, this usually takes around two weeks to flow through to the pumps in Australia, not just two days. The ACCC then sought urgent information from petrol companies, including 7-Eleven, Ampol, BP, Chevron, Mobil, United Petroleum, Viva Energy, and EG Australia.
The ACCC expressed concern about the movements of prices, emphasizing that many consumers were struggling with the rapid changes. They expected petrol retailers to explain how they arrived at their prices, and promised to seek the highest penalties appropriate in any cases brought to court.
The Cost of Being First
To understand what happened next, it’s essential to grasp how fuel price cycles typically work in Australia’s cities. Andy Wu, a leading expert in this phenomenon and a senior lecturer at the University of Melbourne, explains that in normal times, one or two petrol station chains will shift prices up ahead of their competitors. For example, in early 2026, Reddy Express and EG Australia took the lead in the Sydney market, with other chains following suit.
This strategy allows for maintaining a slight pricing edge over the first mover. However, being the first mover is costly, as it may lead to losing business to cheaper competitors. Different retailers take turns playing this role, ensuring everyone benefits from higher prices during the upward phase of the cycle.
Petrol Station Profits Expand – and Then Contract
Aaron Barkley, a senior lecturer at the University of Melbourne who collaborates with Dr. Wu, describes the current situation as extraordinary in the oil market. In such times, petrol stations are aware they can operate outside the normal rules. However, the events following March 3 marked a significant change.
With all eyes on the rising price of petrol and stern warnings from the ACCC, the fuel price cycle disappeared. Prices across brands and cities converged on the same price. No one wanted to increase their prices significantly, as it could lead to scrutiny from customers, media, and government. The price point at which they converged is extremely close to the wholesale price, meaning even as some stations run out of fuel, the ones still selling petrol aren’t making much money from it.
